Technical Analysis of Financial Markets

Sunday, May 28, 2006

Dow Jones - Analysing the Drop

The recent "sell in May and go away" drop that lasted two weeks beginning on 11/05/2006 wiped some 5.5% off the Dow. A sharp correction dictates a possible 10% pullback; so in context, we may only be half way through if a steep correction is on the cards. The drop sliced through an uptrend that has been intact for the past seven months which started back in mid-Oct 2005, but has found support and bounced off the 38.2% Fibonacci retracement level. Since then, the Dow has managed to rebound but has been unable to penetrate the Oct 2005 trendline and 50-day moving average. It may seem that the old Oct 2005 trendline support has become new resistance.

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